In-House Counsel

Do Noncompete Agreements Really Work?

By Hanna

Sometimes managers wonder whether legal mumbo jumbo really makes a difference.  After all, isn’t all boilerplate language the same?  It’s just a contract.  People sign it and do what they want anyway.  Right?

I understand that some people may feel that way.  But it demonstrates a high level of legal literacy.

What appears as legal mumbo jumbo really does make a difference and it’s not a problem until there’s a problem.  Contracts are enforceable rights that should be taken seriously.

Take the case of a young engineer who signed a noncompete agreement with a firm she joined in September of 2005.  By March 2006 she decided to strike out on her own and one of her initial clients was one from the firm she was leaving.  The employer claimed the engineer’s actions caused the client to break an existing contract with the firm and violated the engineer’s noncompete agreement.  The court agreed and ruled the engineer must pay $89,000 to the former employer.

Without a noncompete agreement this story would have ended differently.  While $89,000 may be chump change to many large corporations, for many smaller ones it’s an amount that hurts and is worth fighting for.

Contracts are an effective way to protect what’s yours.  How much is protecting what’s yours worth to your business?

Full post as published by Legal Literacy on November 21, 2008 (boomark / email).